UK Government Accepts Plan to Separate Retail and Investment Banking

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This article (via Manan Shukla) reports on the conservative government acceptance of the recommendation from a study committee on the financial crisis to separate retail banking from investment banking. It would be similar to restoring the bill that was repealed in the US, prior to the financial crisis, that contributed to the global crisis. This is significant given the centrality of the banking industry to the UK economy. London competes with Wall Street for global banking leadership.

There is speculation on whether this will open the door for other countries to follow the British lead. One of the differences between the UK and the US is that there are no limits on campaign spending in the US. Wall Street has been a major source of campaign funding for both political parties. Obama's campaign was heavily funded by Wall Street. He spent more on his campaign than any campaign in US history. There is a battle now between the GOP and the Democrats for contributions from Wall Street for the 2012 elections. Repealing Glass Steagal would not be high on either parties list. Democracy in the US will always be for sale as long as politicians are dependent upon huge campaign contributions to win elections. The UK sets limits on how much can be spent on political campaigns. That is inconsistent with the prevailing value system in the US. We believe that the market should determine the price for purchasing support from out elected officials, and there should be no price ceiling.